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1993 SNA Update Information - Country comments for issue:
Mineral exploration

Issue description
Issue description in [English] | [French] | [Russian] | [Spanish]
Expenditures on mineral exploration are classified in the 1993 SNA as gross fixed capital formation. The rationale is that mineral exploration creates a stock of knowledge about the reserves that is used as input in future production activities. The question has been raised as to whether this knowledge should be seen as independent of the stock of economically exploitable reserves or whether this leads to double accounting when both discovered stocks of resources and stock of exploration are capitalized.
Country comments
Number of country comments for selected issue:57
  Date postedSourceComment
 10/10/2006SwedenFurther clarification/analysis required
 15/09/2006United KingdomWe agree with all the recommendations made by the AEG.
 15/09/2006LatviaAfter deep discussions and expert consultations we basically support the 1993 SNA Update Issues.
 18/08/2006ItalyWe are in favour of the first four recommendations, but we think that further thinking is required on recommendation 5 (“Payment by the extractor to the owner of the resource should be recorded as property income (rent) regardless of the label given to the payments.”).
 31/07/2006MongoliaWe support the change of the term “mineral exploration” to “mineral exploration and evaluation and agree that the description of the coverage of this item should be enhanced for clarification.
 31/07/2006IsraelWe agree with the AEG recommendations on these issues.
 28/07/2006LithuaniaIn general we support the recommendations.
 27/07/2006EgyptEstimating the output of mineral exploration and its depletion must be clarified. Royalty payments should be considered as property income. We endorse the recommendation made by AEG.
 03/01/2006CubaConsideramos que tanto la clasificación, frontera, valoración y definición de los activos convienen ser revisados. Debe ser analizado también el criterio de propiedad por parte de una unidad institucional, dado que en la metodología actual aparecen los flujos en el sistema una vez que comienzan a usarse como activos económicos; quedan excluidos recursos naturales de la actual clasificación, etc.
La formación de capital humano, forma parte en la actualidad del consumo final ante la imposibilidad hasta la fecha de considerar su apropiación por el individuo como activo. Deberá buscarse una solución para registrarse como activo
Los gastos de I+D, no se consideran activos con excepción de los destinados a la exploración minera, ya descritos. Proponemos que la I+D forme parte de los activos, y que los trabajos de exploración minera se registren independientes del stocks de reservas económicamente explotable.
 19/12/2005KenyaAgreed
 29/11/2005TadjikistanНа наш взгляд, разведка полезных ископаемых всегда предполагает оценку запасов полезных ископаемых, так что добавление слова "оценка" в название этого термина не представляется необходимым; однако у нас нет возражений против этого.
Мы согласны, что было бы полезным пояснить необходимость разных подходов к оценке рыночного производства и производства для собственного использования (в части разведки полезных ископаемых).
Мы согласны, что результат производственной деятельности по разведке запасов полезных ископаемых должна рассматриваться как произведенный актив, в то время как запасы полезных ископаемых, созданные природой, должны относиться к непроизведенным активам.
На наш взгляд, платежи разработчика запасов полезных ископаемых их владельцу должны рассматриваться как доходы от собственности (даже если они отнесены к налогам в государственном бюджете); по этому вопросу требуется согласование между СНС и статистикой государственных финансов.
 29/11/2005CambodiaWe know that “the mineral” is a natural resource of a country, therefore we wish to agree with the AEG’s recommendation for the mineral exploration should be proposed to change from “mineral exploration to mineral exploration and evaluation” and separately from the “mineral deposits”. However the methodology for estimating the output of mineral exploration and its depletion must be clarified with a clear guideline for practice. Most cases in Cambodia, the mineral exploration are generally in form of Royalty Payments that are paid by the private companies or/and other people unknown ID. So far such Royalty Payments should be considered as a property income.
 30/06/2005Slovak RepublicIn principle we agree with breakdown to “mineral exploration and evaluation”. In condition of the Slovak Republic both successful and not successful mineral exploration is included into the price of structure, and have no significant share. Therefore it is difficult to obtain separate information on this item.
 30/06/2005Serbia and MontenegroWe agree with the recommendations made at the December 2004 meeting of the AEG.
 22/06/2005Bank of GhanaThe 1993 SNA introduced mineral exploration as a form of produced intangible fixed asset, and recognition of sub-soil assets as a category of tangible non-produced assets. This has raised questions such as; how to separate the discovery activity from the value of the resource, measurement of the exploratory activity, valuing the deposit, how to record payment to the legal owner in the SNA, and the unit in which to record the resource in the balance sheet. There is the suggestion that instead of keeping the discovery of the asset separate from the deposit itself, they should be combined and a new 'developed natural asset' be recorded instead. This would be treated as a produced asset so that, in effect, the value of the deposit becomes included in the total of produced assets and excluded from the total of non-produced assets. However, the Canberra II Group recommended that the assets be kept separate as in the 1993 SNA. We suggest that this issue is further explored. Nevertheless, we agree with the position of the Canberra II Group on the other issues such as recording of payments to owner, valuation of the two assets — mineral deposits and exploration activity.
 03/06/2005Central Bank of VenezuelaWe agree with the change from the term "mineral exploration" to "mineral exploration and evaluation," as well as with booking exploration and mining evaluation (produced intangible asset) separately from mineral deposits (unproduced tangible assets).
With respect to the valuation of mineral deposits, although from a theoretical microeconomic perspective, we recognize that the best method consists of obtaining the net present value (NPV), at a macroeconomic level, this estimation is not easy. Therefore, from a practical standpoint, the accounting valuation the owner shows on the balance could serve as an appropriate approximation.
It should be noted that in the case of Venezuela, all subsoil assets are owned by the State and there is no estimation of mineral deposits.
 19/05/2005Bank of IndonesiaBI agrees with the AEG recommendation.
 18/05/2005Central Bank of Chile cb_Chile17;
 16/05/2005JordanDOS agree with AEG recommendations related to this issue, and hope that more emphasis should be given by the international agencies to solve the problem of the appearance of discrepancies between taxes in the SNA and in government accounts
 16/05/2005Eastern Caribbean Central BankWe agree with the recommendations of the AEG.
 13/05/2005National Bank of Kazakhstan1) Terminology and coverage for mineral exploration. We express our approval upon using the expression “mineral exploration and evaluation”.
2) One asset or two. We consider that keeping the discovery of the asset separate from the deposit itself is the sound decision. We also support the principle of “produced asset” and “non-produced asset”.
3) Valuation of the exploration and expenditure activity. We consider that these activities should be valued at market price (is often available) even though they (activities) have non-commercial nature or the results of exploration activities are unfavourable. We are also in chime with the following: when the activity is undertaken by a separate enterprise the full amount charged by this enterprise should included in the value of mineral exploration and evaluation.
4) Valuation of the mineral deposit. We are positive that mineral deposit itself can be estimated by the net present value of the resource rent, especially in practice because the fundamental and basic stimulus of the deposit development is the receiving of fixed extra cost (differential rent).
5) Payments to the owner. We agree that payments made by the exploiter to the legal owner of the mineral deposit are to be treated as “property income”. But according to our practice in case of product sharing agreements in oil and gas sector royalties also are included in recoverable expenditures (at the expense of cost oil by the government).
6) The ownership of the deposit. We consider that in case of concessions the concessionaire is the owner of the extracted resources, and in case of product sharing agreements the government is owner.
 12/05/2005European Central BankThe ECB shares the view expressed by others that the distinction betWeen rents (property income) and taxes, i.e. how to record the payments of the extractor to the owner of the deposit when the latter is the government, should be further examined. In addition, consistency should be ensured betWeen this aspect and the ongoing discussions on the distinction betWeen licences and taxes under item 35 (tax revenue, uncollectible taxes, and tax credits (recording of taxes)).
 11/05/2005IndiaIndia agrees with the decisions of the AEG.
The payments made by the Mineral extractor are normally in the form of ‘royalty’ payments, which is a property income. However, since the governments do not have operating surplus, these are shown under receipts as miscellaneous or other taxes or receipts. Under issue No. 17, the discussion is on return to capital (produced and non-produced assets) owned by government. This may result in government having property income, in which case the receipts from mineral extractors could also be treated as property income.
 10/05/2005USAThe U.S. Bureau of Economic Analysis endorses the recommendations made by the AEG.
 10/05/2005Bank of BotswanaThe proposed change from ‘mineral exploration’ to ‘mineral exploration and evaluation’ is supported, as is the enhanced description of the valuation of this item. The potential discrepancy between the SNA and the GFS needs to be resolved, and on this point it should be noted that the division of mineral-related payments into tax and non-tax components could also be arbitrary and misleading.
 10/05/2005National Bank of MoldovaWith reference to the above subject we agree with AEG recommendation to change the item “mineral exploration” to “mineral exploration and evaluation”.
We strongly support a clear definition of how to classify payments by the extractor to the owner when the latter is the government, considering the harmonization with balance of payments concepts.
 09/05/2005AustraliaAustralia agrees with the AEG recommendations
 09/05/2005MaldivesThis issue is not applicable to the Maldives as we do not have any sort of mineral exploration.
 09/05/2005United KingdomWe agree with all the recommendations made under this item. In particular the extension of the description to cover evaluation; to include a detailed description of the valuation principles; to make a distinction between 'mineral exploration and evaluation' and 'mineral deposits', and the deferment of the attribution of the ownership of a deposit extracted by a unit, other than the legal owner, to be considered at a future date together with 'leases and licenses', in order to achieve consistency of treatment. This is particularly important where there can be confusion between rents, taxes and payments for licences.
 09/05/2005Central Bank of IranWe agree with the AEG recommendation to continue to record mineral exploration and evaluation as produced asset and subsoil deposit as non-produced asset. All changes regarding to treatment of mineral exploration are consistent with the principles in the SEEA2003. Just as the value of a produced asset is assumed conceptually to be equal to the net present value of the capital services it renders, so the value of a natural resource should be set equal to the net present value of the resource rent it earns over time. However the methodology for computing consumption of fixed capital of mineral exploration is necessary to be more clarified.
 09/05/2005ItalyWe agree with the recommendations of the AEG.
 06/05/2005TurkeyWe agree with the recommendations made by the Advisory Expert Group on National Accounts at its second meeting in December 2004.
 06/05/2005Commonwealth of Independent States In our view, mineral exploration always implies evaluation of mineral deposit so adding the word “evaluation” to the name of the term does not seem necessary; however, we have no objections on this point.
We agree that clarification would be useful with regard to different approaches for valuation of market and own account production .
We agree that mineral exploration which represents the results of productive activity on revealing mineral deposits should be treated as a produced asset while mineral deposits created by nature should be allocated to non-produced assets.
In our view, payments by the extractor to the owner of the deposit should be treated as property income (even if they are allocated to taxes in GFS); reconciliation is needed on this point between SNA and GFS.
 06/05/2005Macao, SAR ChinaWe agree with the recommendations.
 06/05/2005VietnamWe agree with AEG decisions that exploration activity is separated from deposits are non- produced assets.
Because Mineral exploration and evaluation may be included in the following expenditure:
- Acquisition of rights to explore
- Exploratory drilling
- Topographical, geological, geochemical and geophysical studies
- Trenching, sampling and activities in relation to evaluation of technical feasibitily and commercial viabilily of extracting a mineral resource
 05/05/2005SwedenWe agree on the following AEG recommendations:
- to change the item “mineral exploration” to “mineral exploration and evaluation” and to draw on the IASB coverage of this item to specify the
SNA item.
- that the description of the valuation of this item should be clarified to make clear that it is market production to be valued either at market prices, if purchased, or as the sum of costs plus mark-up, if produced on own-account.
- to maintain a distinction between mineral exploration and evaluation as a produced asset and the mineral deposit as non-produced assets.
- that, in principle, payments by the extractor to the owner of the deposit are property income. However, when the owner is government and the payments are described as taxes, adhering to this principle introduces a discrepancy
between taxes in the SNA and in government accounts. This needs further consideration.
- that the question of attribution of the ownership of a deposit extracted by a unit not the legal owner is deferred to a future meeting when leases and licenses will be discussed more generally.
Comments:
Though we generally disagree with proposals of splitting legal ownerships into several “economic” ownerships we think the topic should be thoroughly discussed.
We do not agree on the following AEG recommendation:
- that the preferred valuation for mineral deposits, market price, is seldom available. In default, the deposit should be valued as the present value of
future receipts of resource rent.
Comments:
A single comment on the recommendations on valuation could be made. As a general choice in valuation we have two well known opportunities to use cost valuation or market price, and that is good enough. And if market prices are hard to get it would be less satisfactory to use the present value method but to accept it as the default method is to recommend a calculated value a priori the existence or not of better valuations. In default of other valuation methods the present value method can be used but this is more or less already the state of play in SNA.
 04/05/2005DenmarkStatistics Denmark agrees with all the recommendations but would like to make the following observations:
Sub-recommendation 2. The AEG agreed that the description of the valuation of this item should be clarified to make clear that it is market production to be valued either at market prices, if purchased, or as the sum of costs plus mark-up, if produced on own-account.
Statistics Denmark agrees that market production should be valued either at market prices or by cost plus a mark-up. However, the above formulation indicates that all mineral exploration and evaluation should be regarded as market production and thus be valued as described. We would like to raise the question whether still some mineral exploration and valuation should be regarded as non-market production e.g. activities carried out by government geologic survey institutions. If so, should a mark-up factor then really be included in the valuation procedure? A clarification is needed on this point.
Sub-recommendation 4. The AEG agreed that the preferred valuation for mineral deposits, market price, is seldom available. In default, the deposit should be valued as the present value of future receipts of resource rent.
Statistics Denmark agrees, but observe that work within the London group on Environmental accounting has shown, that country practises concerning the calculation of resource rent differ somewhat and that there is still a need for work on methods and practises for NPV valuation of subsoil assets.
 29/04/2005NorwayStatistics Norway agrees with the AEG proposals.
 28/04/2005Trinidad and TobagoWe agree with the recommendations of the AEG.
 25/04/2005Bank of Sierra LeoneWith reference to the above subject we agree with the recommendations of the Expert Group on National Accounts (AEG) especially where there is harmonization of definitions and other concepts between the Balance of Payments (BOP) and system of National Accounts (SNA).
 13/04/2005Bank of Korea We agree with the AEG recommendations to continue to record mineral exploration and evaluation and subsoil deposits as separate assets, the first a produced asset and the second non-produced. We also agree with both of the descriptions that the mineral exploration should be valued either at market prices, if purchased, or as the sum of costs plus mark-up, if produced in own-account, and that the mineral deposit should be valued as the present value of resource rent it earns over time in default of market prices. Although both discovered stocks of resources and stock of the mineral exploration are capitalized, this does not lead to double accounting of assets because the value of the mineral deposit is calculated in such a way that the value of the resource rent used in net present value excludes the value of the mineral exploration.
 12/04/2005GreeceWe agree with the recommendations of the AEG on the issues for which a decision has been taken, at the December 2004 meeting of the group.
 12/04/2005Central Bank of HondurasLa recomendación del SCN debe ser considerada simultáneamente con el Sistema de Cuentas Económicas y Ambientales, si bien la cobertura de gastos incluida en la exploración minera en el SCN 93 es básicamente la misma que la planteada en las reuniones de los Grupos Consultivos Expertos (GCE), la forma de exponerla se considera más precisa.
 12/04/2005Central Bank of Cote d`IvoireLa difficulte reside dans l`evaluation de l`activité de prospection dont il n`existe pas de marché normalement. Par ailleurs, les dépenses d`exploration minière étant considérées comme de la formation brute de capital fixe, peut-on comptabiliser une dépréciation de capital sur le stock de connaissance qui en résulte (savoir faire et découverte de nouveaux champs qui pourront servir dans le futur dans le processus de production), lequel peut être assimilé à un service à durée de vie illimitée?
 11/04/2005The NetherlandsWe agree with the recommendations made at the December 2004 meeting of the Advisory Expert Group on National Accounts.
 11/04/2005Central Bank of Kuwait- Kuwait agreed to change the item “mineral exploration” to “mineral exploration and evaluation”.
- Kuwait agreed that this item is market production to be valued either at market prices if purchases or as the sum of costs plus mark-up if produced on own-account.
- Kuwait agreed to maintain a distinction between mineral exploration and evaluation as a produced asset and the mineral deposit as non-produced assets.
- Kuwait agreed that the mineral deposits – in the absence of market price – should be valued as the present value of future receipts of resource rent.
- Kuwait agreed that payments by the extractor to the owner of the deposit are property income.
 11/04/2005PolandIn the scope of costs of ownership transfer as well as mineral exploration we support proposed by the AEG changes.
 11/04/2005Bank of Tanzania/National Bureau of StatisticsWe recommend that a further research on treatment/valuation of unsuccessful and successful exploration. We need more light on the treatment of the two scenarios.
 11/04/2005Hong Kong, ChinaWe support the change of the term “mineral exploration” to “mineral exploration and evaluation and agree that the description of the coverage of this item should be enhanced for clarification.
 11/04/2005IranIn Iran all deposits belong to the public sector. Thus, if the payments are considered as taxes, the tax amounts will experience a sharp increase whereas, the amount of recorded rent in the national accounts will be trivial. It is preferable that the payment for making use of national deposits should remain as rents. Otherwise, we do not with you.
 11/04/2005Germany m2(c)de17;
 11/04/2005MalawiI fully endorse the recommendations of the Expert Group on National Accounts.
 11/04/2005Philippines -Mineral exploration per se should be treated as gross fixed capital formation. Its valuation should not include the value of mineral reserves found.
- NSCB agrees to change the item “mineral exploration” to “mineral exploration and evaluation”. Mineral exploration and evaluation are produced assets while the mineral deposits are non-produced assets.
-In our pilot implementation of the 1993 SNA, in the case where the government is the owner of the land/property to be explored, payments are treated as property income of the government.
 11/04/2005Russian FederationWe agree with the recommendations made by the AEG on National Accounts.
 11/04/2005South African Reserve Bank We accept the recommendations of the AEG, but more guidance should be given on the various sub-issues, the concept of proven reserves explicitly dealt with and cross-reference between the SNA and the SEEA 2003.
 11/04/2005South AfricaSouth Africa agrees in principle with the recommendations but:
· the discrepancy in the treatment between the SNA and the GFS needs to be ironed out;
· we need more guidance from the environmental area.
 18/03/2005Palestinian Central Bureau of StatisticsPCBS is uncertain about the understanding of this item as we find it ambigous, which means that it needs further elaboration.
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